Displaying items by tag: wealth management

2023 has been a year defined by twists and turns that has defied the expectations of most market participants. Amid the tumult, alternative assets have been a source of resilience especially as the industry continues to evolve. According to Prequin’s Head of Private Equity Research Insights Cameron Joyce, the best opportunities are in private debt and secondaries.

In terms of various categories within the asset class, rising interest rates have been a major headwind for private equity. This has limited deal activity and exits, however there are indications that the climate could be improving as we head into 2024, while long-term investor demand remains strong. 

Similar to private equity, venture capital has also been hamstrung by tighter monetary policy in terms of exits and valuations. Real estate has also been negatively impacted by rising rates, resulting in a weaker fundraising environment and muted deal activity. It’s also become more challenging for mid-sized and smaller funds given that many investors are gravitating towards larger funds.

Private debt has been relatively strong due to its seniority in the capital stack and floating-rate structure. This has been increasingly important for companies given that banks have raised lending standards. For investors, private debt has been effective in terms of dampening volatility while delivering above-average returns. 

Finsum: Alternative assets performed quite well in 2023 amid a turbulent year for financial markets. Here’s a roundup of some of the key categories within the asset class.

At the onset of their careers, most financial advisors have big aspirations. Yet, many fail to realize their ambitions and plateau at certain levels. At each level, there are common obstacles that need to be overcome. 

The first phase is the hustle phase, when a lot of energy is expended to start building the business. During this phase, key steps to take are to invest in yourself by embracing discomfort and stretching beyond yourself to grow, build a capable team, get in the habit of giving out value without any expectations, find like-minded and supportive individuals to surround yourself on the journey, and embrace acting fast. Technology can also be leveraged to level the playing field.

The next phase is the surrender phase. During this, the major focus is on building a team and transitioning from being a solo operator. At some point, this becomes necessary in order to achieve more growth. It will require adopting a CEO mindset, focusing on key tasks while delegating others, and developing scalable systems. 

The final phase is the harmony phase. This is when you can step back with minimal interruption to the business. During this phase, the major focus is on aligning personal and professional goals, finding new avenues of growth by leveraging your team, investing in sustainability, instilling a culture, and embracing the flow. 

Finsum: Financial advisors go through phases during their careers that require different strategies and ways of thinking. 

High net-worth clients may be facing a major issue due to the upcoming expiration of the 2017 tax cuts after 2025. This will mean the expiration of higher federal gift and estate tax exemptions. The exemptions, which encompass tax-free caps on gifts during life or at death, will be $13.6 million per individual or $27.2 million for spouses in 2024 but will be cut by 50% in 2026. 

This will mean that many more high net-worth clients will be impacted by the estate tax. And, this is the time to begin planning around this new reality given that many estate tax planning strategies take months or even more than a year to implement. 

Some married couples can take advantage of the current higher levels of exemption by removing assets from their estate via lifetime gifts. According to Robert Dietz, the national director of tax research at Bernstein Private Wealth Management in Minneapolis,“The reality is you have to give away more than half to see any benefit from the gift in terms of the exclusion going away.” And for clients uncomfortable making these gifts now, they can keep control of their assets by opening a trust. 

Finsum: The expiration of the 2017 tax bill means that high net-worth clients will have to grapple with much lower exemptions on tax-free giving. 

The last thing a retiring financial advisor might want to consider is making a significant change to their business. Their focus is often on finding the perfect partner to join their practice so they can transition out over the next few years. However, an overlooked option with significant benefits lies in switching broker-dealers.

Think of it as a reverse recruitment process. Just as firms entice top advisors with cutting-edge technology, competitive compensation, and career development opportunities, these same features can attract a larger pool of potential buyers for a practice. Joining a progressive firm can also expand an advisor's recruitment options, giving them access to a broader range of advisors who might be interested in taking over their business.

Making a switch might seem like extra work at the tail end of a career, but the advantages can be substantial. By aligning with a forward-thinking firm, an advisor may find a smoother transition to their succeeding partner and potentially even a higher purchase price for their practice. Advisors should not dismiss the power of changing broker-dealers as part of their succession plan – it could be the key to a successful and rewarding exit.

Finsum: Financial advisors planning their succession should explore how switching broker-dealers could be their ticket to a rewarding exit.

UBS Wealth Management Americas posted a small increase in advisor headcount and added $300 million in new assets during the third quarter. Both are the first gains after two quarters of declines. Last quarter, UBS had outflows of $3.4 billion. 

The unit posted profits of $307 million, which was $231 million less than last year’s Q3. The bank attributed this to lower commissions as more clients shift towards a fee-based planning model. Another factor is that UBS CEO Sergio Ermotti noted that it doesn’t include interest and dividends when calculating asset growth unlike US competitors. In future quarters, the company will be calculating asset growth in this manner. 

In the quarter, advisor headcount increased from 6,071 to 6,142. However, headcount is still down 2% on a year-over-year basis. The company said in part this is due to its recruitment efforts focusing on a small group of high-producing advisors. Ermotti added that the company is resuming growth bonuses for any advisors who add million-dollar clients. 

Overall, US brokers managed $1.76 trillion in client assets which was up 16% compared to last year primarily due to asset price appreciation. UBS’ Americas unit is a laggard relative to other geographies within the company and its US-based competitors when it comes to asset growth. 

Finsum: UBS posted a small increase in net new assets and advisor headcount. The company is focused on boosting asset growth through the recruitment of high-earning brokers.